By Gill Myers Advanced Diploma The impact of emerging and developing technologies on accounting systems 1 Mar 2023 Last month I moved my accounting records from one type of accounting software to another. The process wasn’t as painful as I thought it would be because of the technology used, and that started me thinking about the impact of emerging and developing technologies on accounting systems. Electronic filing of documents One of my biggest worries was about all of my existing data. What would I do if HMRC came knocking and I couldn’t access my previous years’ records? Increasing over the last few years, my manual files have got smaller as I have attached invoices, receipts and other primary documents to the applicable transaction in my accounting software. The integration of electronic filing with my accounting software has made finding and retrieving information so much quicker and easier than it used to be. Also, because storage is cloud-based, I can access it wherever and whenever I need to and know that documents are protected by the software’s security systems. My new software is HMRC compatible, too, meaning that I can comply with its rules for online filing of VAT returns and, in the future, should be able to submit my annual self-assessment electronically. Electronic signing of documents Another bit of technology was used to set up my new contract; an electronic signature. There are three different types. They carry the same legal weight as a handwritten signature – but with different levels of security. Basic electronic signatures: These are created using any method that allows the signer to identify themselves and indicate their approval of the document (such as typing your name, checking a box, or an image of your signature). Advanced electronic signatures: These are more secure and are created using a qualified electronic signature creation device certified by a trusted third party to meet certain security standards. Qualified electronic signatures: These are the most secure type of electronic signature and are created using a qualified electronic signature creation device and a qualified certificate. I was sent the contract as a secure attachment to an email and provided an advanced electronic signature. The whole thing was completed quickly and efficiently whilst also being secure and confidential. Automation of processes I’m still finding my way around my new accounting software and enjoying the increased automation it offers. Customer details are pulled through from their individual records to populate sales invoices, and net amounts are automatically calculated from unit prices and quantities, VAT amounts are added in line with the settings and invoice totals are calculated. Alternatively, I can click ‘add previous details’ and simply amend them. Invoices from my suppliers can be uploaded from email attachments, which I can then just check with no need for any manual inputting at all. The software has been programmed to streamline routine accounting processes by automating them. Double entry and subsidiary ledger postings are a good example of this. For example, once I’ve entered the details of a supplier’s invoice, the software automatically debits and credits the correct general ledger accounts for a credit purchase and updates the individual supplier’s account. So automation improves accuracy. However, I do recognise that whilst it reduces the opportunities for me to make mistakes, I still will. Therefore, I am being particularly careful to check how the software works, make the right code selections and check that the results are as I expect them to be. It is also saving me time, which I can use for other, more valuable work. This will be so in larger organisations as well, where it can increase efficiency, as, for example, documents can be automatically flagged to the appropriate person as ‘in need of authorisation’. And once authorised, a remittance can be automatically emailed to the supplier and payment made in line with the terms of credit. Artificial intelligence (AI) and machine learning Automation is often used in accounting software in conjunction with artificial intelligence (AI) and machine learning. Machine learning programs identify and learn from patterns in data. So they are used in AI software, which can see patterns in people’s problem-solving or decision-making processes. Used together, AI and machine learning enable software to get better the more it performs a function. When I do a bank reconciliation, the software suggests matches between bank transactions and my accounting records. At first, there were only a few suggestions, for example, when the software could see an invoice number on the bank reference and match it to an outstanding sales invoice. However, a month down the line, it is making more suggestions like payments to a particular account number are my drawings, whereas a different account number means they are my tax savings. Blockchain The final bit of technology I’ve come across is blockchain. Whilst I haven’t experienced it personally, it often features in blogs to which I subscribe. Blockchain is a digital system that records transactions and their details in multiple locations simultaneously. This means, for example, that when a customer pays a supplier, both their records and their banks’ will be updated at the same time with identical details. That is significantly different to what happens using traditional accounting software. Currently, when a customer pays me, everyone involved in the transactions records it separately. I’m the only one who can see the details of my financial transactions, so if I make a mistake, my supplier or bank won’t know, and I am unlikely to pick it up until I do a reconciliation. This is why they are really important because, under this system, the validity and accuracy of accounts can not be 100% guaranteed. If blockchain was used, each time a customer initiated a payment, for example, a ‘block’ would be created, which would be sent to every organisation involved in the chain. Each organisation would then validate the transaction, proving its authenticity, and add it to the chain using cryptography to encrypt the data and ensure only authenticated users have access. This results in everyone having an identical copy of the transaction at all times. It also means that everyone in the chain has to agree to any changes. In summary Using blockchain enables transactions to be completely transparent, reliable and secure and removes the need to maintain and reconcile ledger accounts. This might still be a way off for the majority of us, but accounting software already offers the benefits of using AI to aid decision-making, machine learning to speed up data entry, automation to free up time and electronic filing to enhance security, confidentiality and regulatory compliance. Gill Myers is a self-employed accounts consultant. She has taught AAT qualifications since 2005 and written numerous articles and e-learning resources.